Philadelphia Debt Rating Increased Two Steps to A+ by S&P

Dec. 23 (Bloomberg) -- Philadelphia had its general-obligation debt rating raised two steps to A+ by Standard &
Poor’s after three fiscal years of surpluses.

The rating company also gave a stable outlook and credited
a state oversight board called the Pennsylvania
Intergovernmental Cooperation Authority with the financial
improvement of the nation’s fifth-most populous U.S. city. The
municipality had $1.44 billion in general-obligation debt as of
Oct. 31, according to bond-offering documents.

“The stable outlook reflects our view of the city’s strong
budget performance due, in part, to oversight from PICA,”
Hilary Sutton, a credit analyst, said today in a statement.

The new rating is S&P’s fifth-highest, and the highest the
city has received from the company, which has now increased the
grade three times in the past two and half years, Mayor Michael
Nutter said in a statement.

“Philadelphians should know that in very practical terms,
a higher bond rating means a lower cost of borrowing,” said
Nutter, a 56-year-old Democrat.

Tax-exempt Philadelphia general-obligations maturing in
August 2031 traded today at an average yield of 3.5 percent, or
2.84 percentage points over benchmark munis, wider than the
average spread of 2.39 percentage points since June 30, data
compiled by Bloomberg show.

S&P’s rating also applies to securities issued by the
Philadelphia Redevelopment Authority, Philadelphia Authority for
Industrial Development and Philadelphia Municipal Authority and
supported by the city. There was about $3 billion of such debt
as of Oct. 31, according to a municipal filing.

Moody’s Investors Service grades Philadelphia a step lower
at A2 and Fitch Ratings two steps lower at A-.